Study: pirates biggest music buyers. Labels: yeah, right

Those who download "free" music from P2P networks are more likely to spend …

Those who download illegal copies of music over P2P networks are the biggest consumers of legal music options, according to a new study by the BI Norwegian School of Management. Researchers examined the music downloading habits of more than 1,900 Internet users over the age of 15, and found that illegal music connoisseurs are significantly more likely to purchase music than the average, non-P2P-loving user.

Unsurprisingly, BI found that those between 15 and 20 are more likely to buy music via paid download than on a physical CD, though most still purchased at least one CD in the last six months. However, when it comes to P2P, it seems that those who wave the pirate flag are the most click-happy on services like the iTunes Store and Amazon MP3. BI said that those who said they download illegal music for "free" bought ten times as much legal music as those who never download music illegally. "The most surprising is that the proportion of paid download is so high," the Google-translated Audun Molde from the Norwegian School of Management told Aftenposten.

Record label EMI doesn't quite buy into BI's stats, though. EMI's Bj�rn Rogstad told Aftenposten that the results make it seem like free downloads stimulate pay downloads, but there's no way to know for sure. "There is one thing we are not going away, and it is the consumption of music increases, while revenue declines. It can not be explained in any way other than that the illegal downloading is over the legal sale of music," Rogstad said.

BI's report corroborates data that the Canadian branch of the RIAA, the Canadian Record Industry Association, released in 2006. At that time, the organization acknowledged that P2P users do indeed buy more music than the industry wants to admit, and that P2P isn't the primary reason why other people aren't buying music. 73 percent of of respondents to the CRIA's survey said that they bought music after they downloaded it illegally, while the primary reason from the non-P2P camp for not buying music was attributed to plain old apathy.

74 Reader Comments

Of course not. Why buy into actual data when you can just make up facts as you go to support your claims (my mother always told me this was lying, but when the RIAA or studios do it, it's protecting IP rights).

I think the article nailed it pretty well. CEO's are willfully ignoring the changing landscape of music purchasing habits with the death of full album sales on physical media. They then have the audacity to claim piracy is the only plausible reason for increased sales and declining revenue. Please. Where did these people attend college, Fantasy Land? Now that people can choose to cherry pick the songs they wish, full album sales are dropping greatly. That means you can increase the number of overall sales while seeing a decrease in revenue as people choose to buy one or two songs versus a full album (gee so now you could have 200 people buy individual songs where as before they would have been forced to buy a full album, you figure out where more revenue is made).

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EMI's Bjørn Rogstad told Aftenposten that the results make it seem like free downloads stimulate pay downloads, but there's no way to know for sure.

Meanwhile, when in court the body representing these studios seems to have a firm grasp on just how much piracy hurts the industry, causing lost jobs, and costing the studios billions each year. too bad anyone with a two digit IQ or greater can easily pick apart the numbers they use.

No surprise at all. That's exactly how I used to use Napster, back in the day. Download to preview, buy the albums containing songs I liked. When that went away, my purchases dropped by half; if P2P went away entirely, I'm not sure if I'd buy any music any more.

TheSpikeIs it possible that P2P isn't replacing music sales as much as it is replacing music radio?

I hadn't actually thought of that avenue. Why not, terrestrial radio is filled with ads and limited in choices. Satellite radio is neat, but it's not free.

Honestly, if you read the link I posted in my prior post, all signs point to the studios themselves as far as why revenue is declining. They ship fewer and fewer titles, ignore market trends, and then moan when revenue doesn't rise. Though you have to hit up more reliable sources than the RIAA to get the actual stats for the recording industry (what a lark).

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The RIAA's damage is all self-inflicted. They blamed the demise of the CD single on piracy, but the truth is that they just stopped making them, at least in the U.S. In 2003, they apparently decided they didn't need to make albums any longer and went back to selling singles.

An industry with a 90% failure rate cuts its new product offering by more than 80% over a four year period. Then it starts suing people because sales are down and it's obviously all the fault of the single mothers, college kids and dead people.

Overall revenue is down, because people can finally buy just the 1 or 2 decent songs from a so-called 'album', without needing to also buy the 8-10 filler songs that are also on it.

Of course, it takes more work for the artists and labels to create more 'good' songs (and advertise them), but instead, the labels are still trying to figure out some way to trick consumers into buying those crappy filler songs.

I could have told you: people who use peer-to-peer services are less apathetic, which is why they use peer-to-peer AND why they buy more music... even if it's not the same old package-deal music (albums) that SOME people (greedy middlemen) would like them to still be buying.

For what it is worth if the music companies think this is bullshit they are more than welcome to contact me. I spent over $3000 in the past year on music downloads via Amazon (yeah no DRM) as well as purchased nearly 50 other CDs in physical form. Nearly ALL of it came from tunes I sampled via torrents.

Note I get ONLY total issues. I do not cherry pick. To me it is not worth the time. I will more than likely spend the same if not more this year on new titles. Provided I find some decent new artists or new releases from the ones I already bought.

I also buy ALL of an artists catalog if I really like them - maybe I'm freak or something but I have always been a completest regardless of the cost. Moreover if I could send the artist money directly I would do it in a hot minute. I REALLY, REALLY hate the mafiAA.

So we are really supposed to believe a group of people who are illegally downloading music? We should take the word of a group that has no problem with breaking the law?

A poll of shoplifters shows that they actually buy more goods than the average person, which negates any damages. According to shoplifters they actually provide a service since their theft improves store security. More groundbreaking news at 11.

It would be really wonderful if we'd all stop downloading music illegally, but also stop buying their commercialized trash. See what scapegoat they can come up with next?

The music, movie and book publishers will not stop lobbying until they get the right to levy taxes.

This may sound like hyperbole, but it's already happening in Europe. If you play your radio in public or own a photocopier in The Netherlands, private companies like BUMA an BREIN will estimate your use and tax you.

Originally posted by superslav223:So we are really supposed to believe a group of people who are illegally downloading music? We should take the word of a group that has no problem with breaking the law?

And why should we trust the recording industry to have an unbiased opinion on the matter? Because you throw around a few powerful words of dismissal?

Originally posted by superslav223:So we are really supposed to believe a group of people who are illegally downloading music? We should take the word of a group that has no problem with breaking the law?

A poll of shoplifters shows that they actually buy more goods than the average person, which negates any damages. According to shoplifters they actually provide a service since their theft improves store security. More groundbreaking news at 11.

Why should we trust groups that have no problem with paying for the laws to be changed to their exclusive advantage at the cost of social benefit? The whole damn point for copyright in the first place. FUCK-EM!

Originally posted by superslav223:A poll of shoplifters shows that they actually buy more goods than the average person, which negates any damages.

You'd sound far more convincing if you actually had some data to back that up - which is unlikely since people who shoplift probably aren't doing so because "they want to check out what they buy first" - this study makes sense, at least in part, because it basically assumes that people who download music are people who have intrest in music as well (hence, more likely to buy music legally). I'm not entirely sure if you can the same thing about shoplifters though...

Originally posted by mkill:So there are people who are totally into music and want to have a lot of it, and people who are perfectly happy with a dozen songs...

That totally took a scientific study to find out. Especially the part about group one doing most online buying and filesharing, and group two doing neither.

True. It seems most publicized studies on social (and eating) behavior set out to prove the obvious for some reason. It would have been interesting to do a sub-analysis (maybe they did this?) on the filesharers to find the differences between those who also bought music online and those who didn't. I am curious how much income and age factor in, if at all.

If you torrent a band and end up really liking them, it's likely you would want to support them in some way. I tend to go out of my way to buy directly off their site or CD Baby so they get more of my money. Though I hope Jonas Brothers fans don't have the same mindset as me...

It's not really surprising, previous studies have shown that music piracy doesn't hurt legal sales and may even increase sales. "The Effect of File Sharing on Record Sales: An Empirical Analysis" by Oberholzer-Gee and Strumpf (2007) is an good paper to read if you're interested.

Record label EMI doesn't quite buy into BI's stats, though. EMI's Bjørn Rogstad told Aftenposten that the results make it seem like free downloads stimulate pay downloads, but there's no way to know for sure.

The stats or this explanation of them? Does BI offer this explanation? I'm not clear. Jacqui's first sentence here seems to imply Mr. Rogstad is wary of the numbers, but her second seems to indicate he's disputing an interpretation of them.

FWIW, I think it possible, even likely, that "free downloads stimulate pay download" but it's harder to establish a causality than to show a correlation. Maybe these people are just, to use Jacqui's phrase, "click happy". Or should we say strongly oriented towards this particular form of entertainment, so that they just grab is from multiple sources paid and unpaid? (What other comments in the article seem to imply.)

This is an interesting paragraph. It continues:

quote:

"There is one thing we are not going away, and it is the consumption of music increases, while revenue declines. It can not be explained in any way other than that the illegal downloading is over the legal sale of music," Rogstad said.

How does Mr. Rogstad know that "consumption" of music is increasing? I'm not clear how he does, or could, know.

But I also feel enlightened by his choice of language. The primary meaning of the word "consume" is to eat. There are metaphorical uses. One does talk of being "consumed by fire", for example. There the metaphor is of fire eating up what it burns. But how does music get "eaten" as I listen to it?

To me music is an art form. Clearly, Mr. Rogstad doesn't think of it like that. It's something transient, disposable, no more enduring than a piece of toast that I might eat. And when one thinks about it, that's mostly what his company is offering under the name of "music". Very telling.

One thing to consider is that to get people to buy music, they have to know that the music exists, and hear enough of it to see if they like it. Terrestrial radio is worthless, MTV and the like no longer show videos, so how do I find out about new music? You can browse around on online music stores, but you can hardly tell if a song is worth getting based on a 30-second snippet (and while sites like last.fm are sometimes better, many songs are also limited to that very short preview). So, what do you do? If you really like music, you find someplace that has it for you to listen to (i.e. a torrent site) and support the artist if you like it. Or, if you're like me, and don't want to mess with "illegal" P2P programs, you don't end up buying much new music. Does it really serve the RIAA's interests to do everything in their power to keep people from using easy ways to discover, preview, and eventually buy their products?

"There is one thing we are not going away, and it is the consumption of music increases, while revenue declines. It can not be explained in any way other than that the illegal downloading is over the legal sale of music,"

They just dont get it, do they? With the changing nature of commerce in the age of the internet, the fact that artists themselves dont need labels as much anymore, consumers dont have to buy whole albums, and competition is much fiercer, revenue was bound to drop. These guys were in an unsustainable market position, it was never going to last, especially given how stupid they are.

But of course, things start going wrong, and piracy gets the blame. Blame Piracy (to the tune of South Park's Blame Canada). Dont bother looking at our 20 year old business model and mindset, dont consider how your brand has been destroyed by your aggression towards your own customers, just ignore all of that and blame it on other people.

You know, I dont agree with piracy, but I will say that the inventors of MP3 and the idea of sharing music are pioneers in their own right. What stopped the labels from selling their own music in MP3? They could have brought out an online store before music piracy became huge. But no, they didnt like that idea, they liked the huge margins they could get on album sales. Honeymoon's over guys, get used to it. Be glad you didnt need a bailout (although I wish all of them were bankrupt).

Actually I blog about this a fair bit, as well as having nearly completed a report to prove that file sharing doesnt damage the content industry. - The above mentioned report is actually very correct.

My latest blog on the topic compares instant coffee vs starbucks and the hedonic value that is place on each, versus a file downloaded versus cuddlying up with your date at the cinema and eating fresh popcorn. Oh yeah it also talks about the reason that all of this P2P nonsence is being pushed is so that ACTA legislation can be implemented globally.

Originally posted by superslav223:So we are really supposed to believe a group of people who are illegally downloading music? We should take the word of a group that has no problem with breaking the law?

A poll of shoplifters shows that they actually buy more goods than the average person, which negates any damages. According to shoplifters they actually provide a service since their theft improves store security. More groundbreaking news at 11.

Wow, just wow. No wonder music/movie industry is going down the drain if people like you are working for them. No common sense at all there.

Maybe start listening to consumers and get off your high chairs in your castles in the sky where you're totally out of touch with reality.

You know that putrid, slimy growth that clogs up your drain; a mixture of old hair, faecal matter, bile fluids and other miscellania eliminated from animal digestive tracts... that is nourishment for music industry executives.

Here in the Netherlands a tudy was done last yera, and it showed similar results.Peope that pirated music were also buyng more music/content then people that did not pirate content. One of the 'side effects' was that people that pirated music, were exposed to new music they normally would not consider. And would buy it if was any good.

"There is one thing we are not going away, and it is the consumption of music increases, while revenue declines. It can not be explained in any way other than that the illegal downloading is over the legal sale of music."

As the article says, this doesn't take into account the single download versus album sales. It's not that hard to demonstrate that legal says of *consumed* music has increased.

CDs still cost ~$16 so a loss of 156 million CD sales = ~$2.5B reduced revenue. Individual songs sell for ~$1 so the online songs only make up ~$844M for a net revenue loss of about $1.65B. That's to the entire industry including the retailers though.

The net loss to the labels is much less. Taking out the packaging, shipping, and retail costs associated with the CD but not the download, CD sales only bring in $9.60 revenue. This reduced the label revenue loss to $653M.

And this is a worst case scenario based on a $15.99 CD. Lots sell for cheaper than that so the loss would be less.

But that's from the labels' income interpretation of "make up the decline". The economics of buying music has changed so the real issue isn't income, it's whether or not the "piracy" market has caused a reduction in legal purchases.

From the number of music sales, the story is different. There are 156 million few sales in the form of CDs, but 844 million more sales in the form of online (legal) downloads. That's a net increase of 688 million sales from 2003 to 2007. In terms of sales, that last statement in the article is wrong. Online sales more than make up for lost CD sales.

From the consumer's point of view, we only purchase the songs we're interested in. That's impossible to know exactly since CDs come with many songs, but we can bound the problem.

If consumers had been buying whole CDs because they were interested in only 1 song (and got another 14 songs they didn't care about), then each CD sale reduced represents only 1 reduced song sale we care about and each online sale represents one increased song sale we care about, for a net increase of 688 million songs purchased -- that we actually want to buy.

At the other extreme, if we purchase CDs because we want all of the songs, with say 14 songs on a CD average, that would be a net loss of 1.34 billion song purchases.

The cross-over is at 5.4 songs (844 million increase / 156 million loss). If we buy CDs because we want at least 5.4 songs on the CD, on average, then this represents an exact break-even in terms of music consumed. We've reduced our song consumption by 5.4 songs X 156 million CDs = ~844 million songs we purchase less through CD sales and purchase exactly 844 million more online.

So what's the reality? If it's anything like anybody I've ever known, most CD purchases have always been for fewer than 5.4 songs. I've bought CDs for as few as 1 song I was interested in, typically for 2-3, and on rare occasion for 7-10 ("Best Of", mixed hits, classic albums). On average, for me, I'd put it somewhere around 3 songs at most that I'm actually interested in paying for per CD.

If that holds true on average, the actual music market has increased in terms of the number of songs purchased on purpose legally. As with other more formal analyses, there doesn't appear to be any evidence that "piracy" is hurting the legal market. The net effect seems to be that it is forcing labels to only sell the songs that people want to pay for instead of bundling them with songs they don't want to pay for.

That is why revenues are down. Labels have been making money off of a dishonest business model and that is now going away. Granted, there wasn't a big opportunity do it differently in the past. Singles (CD, tape, vinyl) couldn't do as well because of the overhead costs. Printing, shipping, and other overhead costs for singles were almost the same as a whole album so they couldn't reduce the price much, certainly not to, say, $1 per CD single. Whole albums were a much better deal for the consumer. Even if only 2-3 songs were of interest, it'd be cheaper to pay $15 for the whole CD than, say $21 for three $7 CD singles.

But that has changed. The labels need to come to grips with that. And they need to stop blaming piracy and the consumers.

"The consumption of music increases, while revenue declines [..] can not be explained in any way other than that the illegal downloading is over the legal sale of music."

Boy, he learned his propaganda-lessons in the iraqian ministry. If they don't even try to find true reasons why a shitty industry that spawns remixes and covers from past times goes down the hill, I don't know if they will ever arrive in reality.

Originally posted by superslav223:So we are really supposed to believe a group of people who are illegally downloading music? We should take the word of a group that has no problem with breaking the law?

A poll of shoplifters shows that they actually buy more goods than the average person, which negates any damages. According to shoplifters they actually provide a service since their theft improves store security. More groundbreaking news at 11.

The shoplifter analogy doesn't work with digital goods. When you steal a physical item, you cost the company money b/c they lost the cost of actually manufacturing the item and no one else can purchase that item (because you have it).

For digital media, copying it costs the original creator absolutely nothing. They do not loose the cost of manufacturing it, and it is still available to be sold to someone else. The only thing lost is a potential for a sale to the person who copied it, but it is not guaranteed that they would have purchased it in the first place.

Does downloading music hurt revenue?

Probably, but not nearly to the extent that the RIAA and MPAA claim. One of them actually claimed that illegal downloading costs them more annually than the GDP of France. Obviously, this is a bold face lie as they've never even approached that level of revenue.

The more significant reason that the RIAA is loosing money is the loss of album sales. (the MPAA actually had revenues increase last year over the last decade, with downloading at record levels). THe entire record industry during the 90s and before pushed the album as the holy grail at ~$15 a pop. Today, they sell single tracks at $1 a pop. It doesn't take a rocket scientist to figure out that revenues are going to drop without selling 15x as many items. Unfortunately for their bottom lines, this isn't going to realistically happen.

They've also pissed off a huge portion of their most loyal fanbase through lawsuits and intimidation. I know quite a few people (my self included) that will never buy another item from an RIAA member. I don't think this is nearly as large an issues as the loss of album sales, but it just adds to the problem.

I wouldn't buy their music stuff because it is mostly crap! Purely mechanical, zero art...Furthermore I would have to be mad financing opposition, so that they would use MY MONEY to hunt innocent people, to corrupt politicians ("lobbying" is the polite term, isn't it?), to censor Internet and so on..

Originally posted by obimk1:Here in the Netherlands a study was done last yera, and it showed similar results.Peope that pirated music were also buyng more music/content then people that did not pirate content. One of the 'side effects' was that people that pirated music, were exposed to new music they normally would not consider. And would buy it if was any good.

Bingo - I am more of a music freak than most people I know and yet it was Oink that did the most to expand my exposure to and purchasing of music from new genres and new artists. Far more than any music magazine or record store.

The record industry needs to leave the stone age and start delivering what people want. The user experience of buying music is flat out primitive. This limits their ability to sell music to the people most willing to buy it, because such buyers are more demanding with regard to subjective quality of music, sound quality, contextual information around the purchase, formal flexibility and availability of the product. In other words the same old, same old is not good enough and incredibly huge numbers of web anarchists seem to be better at doing the music industry's job of "selling" music, than the industry itself.

In fact, its........embarassing. In effect means they are adding increasingly little value.

This is the real problem the industry faces and it is high time they addressed it, instead to trying resorting to their age-old tactic of manipulating the law to fleece BOTH artists and music lovers.

But despite all this - I dont expect to see the record industry greenlight sales of FLAC files on Amazon anytime soon. In fact probably never. They are clearly more interested in sinking endless sums of money in laywers fees than in improvning their customer experience.

Interesting that when it's about video games and violence, there are hordes of comments about correlation not being the same as causation. Thus far, this is the minority of comments. In essence, most commenters are behaving the way of the record industry - misusing facts. As has been stated above, the fact that illegal downloaders are also high purchasers is easily explained by the fact that this group likely represents music lovers. The numbers make no statement about how much the same music lover would buy in the absence of the availability of illegal downloads. It may be less, it may be more.

Anecdotal evidence is worth the digital ink it's typed with, but browsing and sampling new music in a way I can control (i.e. not radio, sat radio or some other programming service) is very damaging to my wallet. I discover new artists I like and it drives me to buy more music. Lots more music -- not because my desire to "consume" is increased, but because the range of "goods" is greater.

Brick and Mortar retailers have used this principle forever. There's a reason why end caps are prime display space and Wal-Mart puts the batteries 5 aisles away from the gadgets -- more eyeballs on more goods mean more sales. Or ears, in the case of the music industry.

In my case, though, I don't use illegal P2P filesharing, I use Lala.com. But the principle holds. If I weren't a music fan, I wouldn't even be seeking out new music to buy in the first place.

Of course not. Why buy into actual data when you can just make up facts as you go to support your claims (my mother always told me this was lying, but when the RIAA or studios do it, it's protecting IP rights).

I think the article nailed it pretty well. CEO's are willfully ignoring the changing landscape of music purchasing habits with the death of full album sales on physical media. They then have the audacity to claim piracy is the only plausible reason for increased sales and declining revenue. Please. Where did these people attend college, Fantasy Land? Now that people can choose to cherry pick the songs they wish, full album sales are dropping greatly. That means you can increase the number of overall sales while seeing a decrease in revenue as people choose to buy one or two songs versus a full album (gee so now you could have 200 people buy individual songs where as before they would have been forced to buy a full album, you figure out where more revenue is made).

quote:

EMI's Bjørn Rogstad told Aftenposten that the results make it seem like free downloads stimulate pay downloads, but there's no way to know for sure.

Meanwhile, when in court the body representing these studios seems to have a firm grasp on just how much piracy hurts the industry, causing lost jobs, and costing the studios billions each year. too bad anyone with a two digit IQ or greater can easily pick apart the numbers they use.

Interesting that when it's about video games and violence, there are hordes of comments about correlation not being the same as causation. Thus far, this is the minority of comments. In essence, most commenters are behaving the way of the record industry - misusing facts. As has been stated above, the fact that illegal downloaders are also high purchasers is easily explained by the fact that this group likely represents music lovers. The numbers make no statement about how much the same music lover would buy in the absence of the availability of illegal downloads. It may be less, it may be more.

The gaming industry isn't a twice federally convicted price fixer and illegal cartel. The gaming industry plays in a relatively open and level playing field where fortunes rise and fall with the quality of the work. The music industry is run by an illegal cartel that tries to squeeze both the consumers of music and the music creators. The situations are entirely different.

Interesting that when it's about video games and violence, there are hordes of comments about correlation not being the same as causation. Thus far, this is the minority of comments. In essence, most commenters are behaving the way of the record industry - misusing facts. As has been stated above, the fact that illegal downloaders are also high purchasers is easily explained by the fact that this group likely represents music lovers. The numbers make no statement about how much the same music lover would buy in the absence of the availability of illegal downloads. It may be less, it may be more.

The gaming industry isn't a twice federally convicted price fixer and illegal cartel. The gaming industry plays in a relatively open and level playing field where fortunes rise and fall with the quality of the work. The music industry is run by an illegal cartel that tries to squeeze both the consumers of music and the music creators. The situations are entirely different.

Well, the plural of anecdote is not data, but I can confirm that in years where I'm pirating more, I buy a lot more music. After I discovered high-quality streaming stations like Radio Paradise, I started sampling pretty widely, and spent a very great deal more on music than I had before.

The record companies see that I have, say, 1000 tracks on my hard drive, and count that as 1000 tracks' worth of lost sales -- but what they don't see is that I bought 100 of them, and I wouldn't otherwise have spent a dime.

I'm not exactly young anymore, and I have a LOT of music I've accumulated over the years. I could probably go the rest of my life without buying another track. They WANT me pirating, because if I do, I'll spend money, where if I get no exposure, I spend nothing.

An entertaining few minutes of reading on the gross stupidity, near-sightedness, general truculence, and intransigence of those heading up the music industry. I'm sorry that they are whiney about the current state of their business. It's not like this is something new. As you can see from the stories, the door of opportunity has been opened to them and closed by them more than once. They still don't get it. They're not going to get it. They don't want to think about getting it. LA LA LA LA....I CAN'T HEAR YOU!

Sadly for them, I used to buy more music when Napster was around (1st iteration) than I do now simply because I ran across more things by artists I never heard of before. Sadly, too, the consolidation of radio into the hands for a few large corporations and the subsequent "blandizing" of selection and playlists across the entire bandwidth has rendered commercial radio totally useless as a source of finding new material. Hopefully they will get their wish to punish commercial radio with more fees and drive it out of business. Maybe then things will change (I doubt it, though). Pandora's box is open.